Power Competition Next Door may have Cost WE Energies a Customer

Oct 14, 2013

Presque Isle Power Plant in Marquette, Michigan
Credit adamshoo, Flickr

  WE Energies may close its power plant in Marquette, because a large mining customer there is switching providers. Unlike Wisconsin, Michigan allows electric choice.

Nearly 20 states, also including Illinois, let consumers to shop around for the best deal on electricity. Wisconsin toyed with the idea about a dozen years ago, but legislators saw the problems California was having. Several factors stung its marketplace: soaring fuel prices, a surge in demand for power and several years of providers not adding capacity. Electricity became exorbitantly expensive and in short supply.

Charlie Higley is glad Wisconsin has continued to allow only one provider per region, with state oversight. He’s executive director of the Citizens Utility Board. “It’s very expensive to produce and transmit and distribute electric power. It’s the cost structure of electric power that led to its regulation as a regulated monopoly to providing service for customers,” Higley says.

Higley says giving customers the ability to shop for electric service has not held down prices in those states. In fact, in quite a few, prices are higher than in regulated states.

Since 2002, WE Energies customers in Wisconsin have seen plenty of rate increases, “about three to four percent a year,” according to Brian Manthey, spokesman for the utility.

Manthey says the reason for the increases is pretty straight-forward – WE Energies had to add capacity to satisfy greater demand for power. “We have considerably bolstered reliability in the last 10 years through the addition of power plants, we built the largest wind farms in the state, the transmission system has been upgraded,” Manthey says.

While the utility can now provide sufficient power, a few big users are unhappy about the rate increases. They’re the reason the operators of two iron ore mines in Michigan say they left WE Energies.

To help the utility accommodate large customers in Wisconsin, the state Public Service Commission recently gave WE Energies permission to expand an incentive. Manthey says it offers lower rates to businesses that grow in Wisconsin. “It’s only for the additional amount of energy that they would use,” Manthey says.

An unanswered question is whether those new rates for large users are pushing more costs onto residential consumers, according to CUB’s Charlie Higley.

It is often the large users of electricity that press for lower prices, according to Peter Castensen, a law professor at UW-Madison. So Carstensen says any push for energy deregulation or choice here, would likely have to come from big employers. “It’s the Oscar Meyer in Madison or the Allen Bradley in Milwaukee. Some of the big paper mills up in the Fox Valley. These are the ones who will benefit most having a competitive market, it may really affect their costs,” Carstensen says.

Wisconsin currently has the most expensive electricity rates in the Midwest, behind Michigan.